By Admin on Feb 22, 2010 in Renting & Real Estate
jkstender asked:
Let me start out by saying that this question is purely out of curiosity, I am a renter and not in danger of losing a mortgage or anything. So I don’t need advice or spam offers. Anyways, if you do go into default on a mortgage do you lose all the equity that you have already paid into the property or; if when the lender sells the property the amount of the sale is in excess of the remaining amount owed, do you get that money back?
Let me start out by saying that this question is purely out of curiosity, I am a renter and not in danger of losing a mortgage or anything. So I don’t need advice or spam offers. Anyways, if you do go into default on a mortgage do you lose all the equity that you have already paid into the property or; if when the lender sells the property the amount of the sale is in excess of the remaining amount owed, do you get that money back?
*If* the lender sells the house for more than the remaining loan balance (plus any expenses of foreclosure), they will refund it to the borrower.
the tax lady | Feb 24, 2010 | Reply
The Tax Lady is right. It is that way with any foreclosure or repossession. If the collateral is sold for more than the loan balance, the debtor gets the difference. Most times though, the value of the collateral is less than the balance. When that happens you still owe the difference.
formerflyer | Feb 25, 2010 | Reply
Generally speaking – yes.
If you think you are in danger of defaulting, its best to try selling the house before the bank takes it over. That way you have more control over the expenses incurred. Those expenses will be taken out of the proceeds by the bank if they have to sell it.
You didn’t mention where you live, and everyone probably assumes its in the US, but people should be aware, just in case, that short sales are not permitted in Canada.
So if you default on your mortgage, and it goes through the process and is sold for less than expected, it’s not like you can walk away from your obligation to the bank. You are on the hook for any unpaid amounts in default.
If the house sells and there is a surplus, (after the bank takes it’s share for expenses), you get that back.
Joren | Feb 25, 2010 | Reply